New Office Starts In London Rises To 3.4 mil Sq Ft
UNITED KINGDOM – The amount of office space property developers started constructing in the country’s capital has risen from 3.1 million sq ft to 3.4 million sq ft, surpassing the long-term average of 2.4 million sq ft, according to Deloitte’s London Office Crane Survey Winter 2021.
“The rise in new builds over the past three surveys may reflect a recovery in confidence after the initial shock of the COVID-19 pandemic, or decisions by developers to act on permissions already granted, given the increasing reluctance of planners to sanction demolition due to concerns around embodied carbon,” said the Big 4 accounting firm.
However, the number of new office starts has declined. This means that the average size of new office developments has climbed by 28 percent to 122,339 sq ft. This indicates that real estate developers are willing to undertake a higher risk building larger office towers.
Deloitte also noted that the percentage of new office constructions vs refurbishments has increased to 46 percent of the overall amount from 33 percent in the London Office Crane Survey Winter 2020, although it is still below 50 percent of the total new office start volume.
“The uptick in new builds over the past three surveys has not disrupted the emerging trend towards refurbishments, which we believe to be a structural shift that is happening for sustainability reasons,” said the auditing firm.
Deloitte also revealed that the volume of office space under construction fell to 13 million sq ft. While this is still above the long-term average of 10.7 million sq ft, construction volumes have dropped in 2 straight surveys, even though new office start volume increased as completions surpassed new starts in the Summer and Winter 2021 surveys.
“The proportion of volume under construction that is pre-let has fallen from 45 percent in the Winter 2020 Crane Survey to 31 percent in Winter 2021. This is well below the long-term average of 44 percent, and suggests a willingness by developers and investors to look through current low physical occupancy rates due to the pandemic,” it added.
Meanwhile, the proportion of office rentals by the legal industry rose to 17 percent compared to its five-year average of 9 percent as law firms embarked on one-off office moves. In comparison, that of the technology, media and telecom (TMT) sector, which have dominated office leasing, fell from 40 percent in the Summer 2021 survey to 28 in the latest poll.